Your money wasted: Fraud in free cell phone program

Georgians pay the federal government more than $262 million a year in mandatory universal service charges. That's the hidden fee you pay on your cell phone bill every single month.

That fund is supposed to help the government pay for free phones for the poor.

But CBS Atlanta News found multiple phones being given away to people who already had a free phone, and to people who don't need them or even want them. And the more phones these companies give away, the more money you pay.

Now CBS Atlanta News is asking the Tough Questions about how your money is being wasted in a program some warn is an easy target for fraud.

"Get your free government cell phones today, sign up today, get your free phone today," a Life Wireless contractor yelled out the door of his car.

The pitch the salesman is making is for people to get something for nothing - a free cell phone. In some cases, they receive the phones whether they need them or not.

"I signed up for two already, I got like two of them," one woman said.

The woman was in line to get her third free phone. In some cases, the people lining up for free phones admitted they already had three or four government-supported phones.

The company peddling the free phones is a contractor for Covington-based Life Wireless.

"You're going to get your third one today?" we asked one of the customers.

"Yeah," she said.

But the Tough Question is, are these phones really free?

The answer is no.

Lucinda Christianson told CBS Atlanta News that she didn't know why she received a free phone in the mail one day.

"I'm thinking, ‘Why do I have these? Where did they come from, and what do I do with them now?'" Combs said.

"I think it's a waste of money," Smith agreed.

The women are just a few of hundreds of people who received phones in the mail, even though they didn't qualify for the federal government's LifeLine program.

Another man, who CBS Atlanta News is identifying only as Emil, also received a phone from Life Wireless,

"I think there's a scam somewhere," he said. "I said, 'I don't need this,' so I called the number. They said, 'You have a free phone.'"

But Emil has his own home, retirement and didn't qualify for the free phone.

CBS Atlanta News asked Life Wireless spokesman Michael Geoffroy whether or not his company was sending people phones even if they didn't qualify for them.

"There was a sales agent who we had contracted with, an independent sales agent who really tried to take advantage of the system and tried to sign up people who were not eligible and (attempted) to send out phones to get a commission from us," said Geoffroy.

The more phones the contractors hand out, the more money they make. And some people warned that is an incentive to give out free phones and your money, whether their customers are qualified or not.

Life Wireless launched their own investigation into allegations of fraud after learning one of their sales agents ordered 900 phones for people who didn't qualify.

Life Wireless caught the fraud and has since repaid the federal government about $12,000.

CBS Atlanta News asked Geoffroy if he could be sure that there weren't more fraudulent cases that hadn't yet been detected.

"We check the orders and we check the individuals, so once we get the list back, we review the orders and check on our eligible folks," said Geoffroy.

Geoffroy said that no government funds were wasted in this instance of fraud, and that his company paid the government back from its own profits.

Life Wireless fired the contractor who was found giving out cell phones without adequate checks.

But the bigger problem is that the FCC has no database where companies can check if a person has received one, two, three or even four cell phones from various companies. All someone has to do is show they are on government assistance, show their I.D. and they can get a free phone.

Last month, the FCC enacted comprehensive reforms in the LineLine program, which is expected to save the government $2 billion in the next three years by increasing accountability and decreasing fraud.